onsen town near Tokyo/yokohama

I have spent a lot of time in Japan and have been to many onsen areas - Hakone, Izu Peninsula, Takaragawa, Nozawa, among others. (I used to live there.) I will be back in Japan for a couple of weeks in October and have one night, and one night only, free for a night in an onsen ryokan. I don't need the most well-known, or flashy area, but what I am looking for is a mountain place not more than a couple of hours from Tokyo - or Yokohama since I will actually be staying there, with ease of travel being a priority. I am looking at Bessho as being a pretty easy place to get to; so far I have a reservation at hanaya. But if there are other suggestions I'd love to hear them.

What type of place? Rustic? Single? Town? Modern?

The best onsen ryokan in Japan, in my opinion, is the Iwanoyu in Seni Onsen, but it usually requires reservations at least half a year in advance. It can be visited in a 2-day-1-night trip from Tokyo:
http://www.hikyou.jp/nagano/seni/seni.htm

For a rustic, single standing ryokan in the forested mountains, Hoshi Onsen is very nice. It is possible to go there in a 1-night trip, but access by bus is complicated:
http://www.japan-guide.com/e/e7463.html

For a nice onsen town and the best water, I recommend Kusatsu, where you can walk around the yubatake in yukata in the evenings:
http://www.japan-guide.com/e/e7400.html

Shibu Onsen in combination with the snow monkeys is also possible in a 1-night trip from Tokyo:
http://www.japan-guide.com/e/e6029.html

For a high rise ryokan experience and theme parks, Kinugawa is the best destination:
http://www.japan-guide.com/e/e3875.html

We prefer smaller ryokan usually, and love onsen towns where we can walk about in yukata. I have heard about Kusatsu but it always seemed like it would be a very large town...like Wakura (which I didn't like, particularly). Obviously I have no idea, so if you can tell me more about the town, that would be nice...and any recommendation of ryokan?

I hadn't looked at Shibu, either - any ryokan recommendation?

Hoshi has always been a place on my list to go to, but I think next visit, if we have more time & patience to sort out buses.
I am intrigued by Iwanyu and will give them a call but I have no hope, really, of getting a reservation in October...but you never know.

I guess I am looking for Kurokawa onsen, just closer to Tokyo!

Kusatsu is not like Wakura. It has some large hotels and ugly buildings. And it is quite a large small town, but the town center is attractive (I recommend a ryokan in the center of town as close to the yubatake as possible). And unlike Wakura, the town has lots of yukata wearing bathers strolling around. I liked the Naraya:
http://www.kusatsu-naraya.co.jp/~naraya-en/

I hadn't looked at Shibu, either - any ryokan recommendation?

I only stayed at the Kanaguya, and I liked the building a lot. It contributes a lot to the atmosphere of a stay:
http://www.kanaguya.com/

As for Bessho Onsen, I have not stayed overnight yet, so I cannot judge its overnight atmosphere.

As for a Kurokawa near Tokyo, I am afraid I have yet to find one...

It is nowhere near Tokyo, but with a 3-day JR East Pass, it can, nevertheless, be reached in a reasonable one-night trip: Tsurunoyu or Kuroyu in Nyuto Onsen:
http://www.japan-guide.com/e/e3650.html

Uji, thanks again for your recommendations, I will check on them. I have been to Kuroyu and found it kind of..intimidating. It seemed to be for real onsen fanatics, to stay there and enjoy the sulfur smell. My husband still jokes about how all the men left the mixed bath after I got in....tell me, is it usually the custom for ladies to wrap a towel around themselves in a mixed bath? I did this in Takaragawa as it seemed to be requested but I didn't know, in other places, if it is something I should observe. I prefer not to as the towel is uncomfortable in the bath but if I am being rude I will change...

I am glad to hear that Kusatsu is not like Wakura.

is it usually the custom for ladies to wrap a towel around themselves in a mixed bath?

It depends on the bath. In many mixed bath it is tolerated or, like Takaragawa, even expected. But in some other places it might be against the rules to enter the baths with a towel. If in doubt, I recommend to consult with the bath's operator.